Introducing the Debit Card to Your Child
Starting high school was a big deal and, for me, it felt like an especially big step because that’s when I got my first debit card. My parents sat down with me and explained both what a debit card was and how it worked. Then we wrote down the rules they wanted me to follow regarding how I would use it.
I’ve always been thankful for that initial conversation, because it helped me understand the concept of a debit card long before I ever considered applying for a credit card.
You don’t have to wait until your child is headed to high school to introduce a debit card but, generally speaking, children who are middle school or high school-aged are ready to take this step.
If you’ve been following our blog, you know we’ve already discussed Teaching Children How and Why It’s Important to Save Money. Saving is fantastic but spending money is part of life, too. A debit card can help your kids start to spend (and manage) money without the risk of unwanted debt that can come with a credit card.
Explaining the Concept
When you talk to your child about a debit card, you can begin by explaining that it’s like a grown-up version of using cash. Here are a few salient points to cover:
You must have the money in your bank account in order to spend it.
You can use a debit card at the register in lieu of cash, but you can also (typically) use it to withdraw cash from your account at an ATM
When you buy something using a debit card, the cash comes out of your account almost immediately and is sent to the vendor.
When the money’s gone, it’s gone, until there’s another deposit.
Establishing the Rules
Rules for debit card use will vary by family. It’s key to carefully consider how you want your child to use it before you introduce the debit card concept.
In my family, my parents deposited a certain amount at the beginning of every month. They spelled out exactly what I was expected to spend the money on—and what I wasn’t. For example, if I went to the movies, those funds would come out of my account. But when we went shopping for new clothes, my parents still paid the bill.
You’ll want to establish similar rules, so there’s no misunderstanding about expectations. The amount of your deposit (if you’re doing so) will vary with your expectations, as well. If your child will be paying for movies and an occasional burger with friends, you’ll choose one amount but, if they’re also paying for gas or clothes, it might be a bit higher.
Of course, you don’t have to deposit money to the account. If your child has an income, she can deposit and use those funds. You’ll still want to discuss what she should pay for from her account and what you’ll cover.
When It’s Gone, It’s Gone
One of the real benefits of teaching your child to use a debit card is that it allows her to begin to understand the idea of budgeting. Because a debit card only works when there’s money IN the account, there’s no chance of overspending. When the money’s gone, it’s gone.
If your child does run out of money in a particular month, don’t look at it as a negative. When the account balance is zero and your child comes to you requesting money to go to a movie, your first instinct may be to say, “Absolutely not.” Or it may be to simply hand him the cash. Instead, take advantage of this teachable moment to solidify the concept that money is a finite resource.
“Why did this happen?” you might ask. “Let’s talk about that.” You may even ask what he thinks the right solution is. “You spent all of the money but there are still things you want to do this month, like going to a movie. How do you think we should handle this?”
Giving your child the chance to really think it through, without feeling shamed or penalized, can help them internalize the concept of sticking to a budget.
After talking it through, there are several ways you could handle the cash shortage: you could lend them the money, asking for an “I Owe You,”
You could explain that the consequence of running out of money is that they don’t have the funds to go to the movie, or
You could simply give them the money for the movie.
If you choose the latter option, do so carefully. Depending on the child, it may be a simple gift of grace that they accept, still learning to budget in the future. But some kids are wired differently. What they learn in that situation is that you will always
be there to bail them out. No need to stick to a budget. This could come back to haunt both you and them when they’re adults, managing their own funds.
No matter which option you choose, it’s also a good idea to talk about how your child could handle his finances differently the next month, going through several scenarios.
Another important step is teaching your child how to access his online account. Because banks organize spending into categories, regularly accessing his account can help your child learn to recognize his spending habits and budget reasonably in the future.
A Few Cautions
Talk to your child about the real danger of fraud. You don’t have to go into a lot of detail, but you do want to explain that there are several ways bad guys can get her debit card number. If they do, it’s easy for them to use it and steal her money—that cash will come directly out of the account, just like when she uses it.
By keeping close track of her card, only using reputable online vendors, and regularly checking her account online, your child can help prevent fraud. She should also know that she should never lend her card to anyone.
If she is the victim of debit card fraud, she needs to contact the bank immediately (or talk to you about how to do so).
You might also suggest that she ask the bank to update her debit card number yearly. It’s not absolutely necessary but is one more way to thwart potential thieves.
As you introduce debit card use to your child, keep in mind that each child will have a different relationship with money. Your oldest child may track every penny, never running out and your fourth may spend it all in the first week—or vice versa.
Handing your child a debit card is an important step in helping him or her understand budgeting early and being a fiscally responsible adult. One thing’s for sure: When you decide it’s time to introduce a debit card, it means your baby is growing up!